How do Wealth Managers help you with Taxation?

As an investor, you want to make investment choices that align with your risk tolerance and return expectations. However, tax is one critical aspect to consider when investing your hard-earned money. Every investment you make has a tax consequence as well. By reducing taxes, you can save money and support wealth creation. But taxes are complicated and require expert management. You can consult a wealth manager to help you with taxation and reduce your overall tax bill.

Here is how a wealth manager can help you minimize taxes:

  1. Keep you informed about changing tax regimes: Personal taxation laws keep changing regularly in India. In 2018, the budget imposed a 10% long-term capital gains (LTCG) tax on gains from equity mutual funds online. In 2019, the government announced a Rs. 1.5 lakh deduction for a loan taken to buy a home. In 2021, the budget levied taxes on interest earned over 2.5 lakh from EPF contributions. The budget also imposed capital gain taxes for high-value ULIPs (United Linked Investment Plan) above Rs. 2.5 lakh. With the constantly changing personal tax laws, it becomes difficult for you to efficiently minimize your taxes. However, with expert guidance from a wealth manager, you can stay updated about the changing tax regimes and regulations. This helps make tax-advantaged investment decisions, such as investing in mutual funds online via SIP (Systematic Investment Plan) for the long-term to minimize long-term capital gains tax.
  2. Tax-proof investments:Your wealth manager will study your existing investments, and identify gaps that could potentially lower taxes. Further, the wealth manager will suggest you make tax-advantaged investments to reduce your tax bill. For instance, investments in equity mutual funds online, PPF (Public Provident Fund), etc., could help you get a tax benefit of up to Rs. 1.5 lakh in a financial year under Section 80C. The wealth manager will aim to reduce taxes on income earned from investments. For example, interest from bank FD is taxed at 30%. However, investing the same sum in debt mutual funds online could lower the tax charge. Debt mutual funds investments sold after three years will attract an LTCG tax of 20%. Your wealth manager will also minimize taxes at the time of sale or withdrawal. LTCG above Rs. 1 lakh from mutual funds online (with a holding period of one year) are taxed at 10%. Your wealth manager can help you stagger your sales over multiple financial years to save on taxes. Further, the wealth manager can deploy tax-loss harvesting strategies to lower taxes.
  3. Tax-efficient asset transfer:Your wealth manager can also minimize your estate taxes by suggesting tax-efficient ways to transfer wealth to your family or nominee. The wealth manager can suggest creating a living trust, making charitable donations, giving lifetime gifts, and more to reduce the estate taxes for your beneficiary.

In all, your wealth manager can keep you informed about the altering tax rules and help you choose tax-efficient investments to achieve different financial goals. The wealth manager will enable you to take full advantage of tax exemptions and deductions, defer taxes and compound your wealth while also suggesting ways to make tax-efficient wealth transfers.

Use the Tata Capital Moneyfy App to make tax-efficient investments in mutual funds online.